Schuberth v. Prudential Insurance Company of America

• Decision Date: 09 July 1925
• Docket Number: 191 1/2-1925
• Citation: Schuberth v. Prudential Insurance Company of America, 86 Pa.Super 80 (Pa. Super. Ct. 1925)
• Parties: Schuberth, Appellant, v. Prudential Insurance Company of America
• Court: Pennsylvania Superior Court

86 Pa.Super. 80

Schuberth, Appellant, v. Prudential Insurance Company of America

No. 191 1/2-1925

Superior Court of Pennsylvania

July 9, 1925

Argued May 4, 1925

Appeal by plaintiff from order of C.P. Allegheny County-1924, Docket " A", No. 3057, in the case of Helen L. Schuberth v. Prudential Insurance Company of America.

Assumpsit to recover on insurance policy. Before Ford, J. Rule for judgment for want of a sufficient affidavit of defense.

The facts are stated in the opinion of the Superior Court.

The court discharged the rule. Plaintiff appealed.

Error assigned was the order of the court.

Abraham Pervin, for appellant. -- In an ordinary life insurance policy the interest of the beneficiary is vested where the right to change the beneficiary is not reserved: Herr v Reinoehl, 209 Pa. 483.

John H Scott, for appellee. -- Vested rights reside in the beneficiary, but are subject to the terms of the contract Smith v. Metropolitan Life Ins. Co., 222 Pa. 226; Eagle v. N.Y. Life Ins. Co., 48 Ind.App. 284, 91 N.E. 814; Morgan v. Prudential Life Ins. Co. of America, 95 So. 355.

Before Porter, Henderson, Trexler, Keller, Linn and Gawthrop, JJ.

OPINION

TREXLER, J.

In 1902 Andrew H. Schuberth received a policy from defendant company for $ 1,000 payable at his death to Helen L. Schuberth, beneficiary, if she survived him, otherwise to his legal representatives. Insured did not reserve the privilege of changing the beneficiary. The policy contained a clause, " Cash Loans -- If this policy be continued in force, the insured may borrow from the company the amount specified in the following table, by making written application for the loan and assigning the policy to the company as security in accordance with the terms of the company's loan certificate; provided five per cent interest on the whole amount of the loan be paid annually in advance." In 1908 insured applied for a loan of $ 62 of which neither interest nor principal was ever paid. After paying premiums for eleven and one-quarter years the premium due on May 3, 1913, was not paid. The company then invoked the power given under a clause which provided that if there was a nonpayment of any premium due the insured could surrender the policy to the company and get a paid up life policy but if not surrendered for a paid up life policy then there should be a non-participating paid up term policy for the full amount insured by this policy, any indebtedness to the company to be adjusted in the issuing of such term policy. The company then issued a term policy apparently strictly in compliance with the method designated in the policy. This term policy was for six years and three hundred and two days and expired February 29, 1920. The insured's death occurred December 12, 1921. The plaintiff's motion for judgment for want of a sufficient affidavit of defense is premised upon the argument that the wife being named as the beneficiary, there being no reserved right to change the beneficiary, her interest was vested and no loan could be made without her consent, and further that the company could not forfeit the policy for nonpayment of loan and interest without demand for payment of the same before such forfeiture.

The appellant has cited a number of cases which clearly show that the beneficiary has a vested interest in the policy unless the power to change is reserved by the terms of the contract for that purpose. The appellee does not dispute this statement and it is well supported by authority, Cooley's Briefs on the Law of Insurance, volume 4, p. 3753. We cannot however, accede that the interest residing in the beneficiary is so absolutely vested that it cannot be divested. If she had died before her husband her interest would have died with her. If he had failed to keep the policy alive her interest of course would have ceased. Appellant argues that it is useless to say that she has a vested interest if he can borrow money against the policy; that the right to borrow is in reality a right to exhaust the benefits of the policy presently. There is force in this contention but the answer is that the parties had made their contract and the interest in the beneficiary, although vested, is subject to the provisions of the contract. The contract expressly declares that the insured may borrow. The " insured" clearly means the husband, Healy v. Prudential Ins. Co., 140 N.Y.S. 505. We certainly cannot construe...